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Note 9 - Convertible Notes Payable

6 Months Ended

Jun. 30, 2019

NOTE 9 – CONVERTIBLE NOTES PAYABLE

On January 7, 2019, the Company completed the first close on a $7.5 million private offering of securities (the “Offering”), whereby the Company entered into a Note Purchase Agreement (the “Purchase Agreement”) with certain accredited investors, pursuant to which the Company issued to those investors $1,074,000 worth of 10% convertible promissory notes, convertible into shares of the Company’s common stock, par value $0.0001 per share at a conversion price of $1.00 per share upon the terms and subject to the conditions set forth in the Note Purchase Agreement and the Notes (the “Notes”), for a maximum of $7.5 million. The Notes have a maturity date of December 31, 2019 if not converted. The Company recorded a beneficial conversion feature of $1,031,040 upon issuance and recognized amortization of the debt discount of $239,040 for the six months ended June 30, 2019. On March 14, 2019, the Company completed the second close and issued $230,000 worth of 10% convertible promissory notes. The terms and maturity date are the same as those for the January 7 closing.

In conjunction with the April 12, 2019 Hydro technology license acquisition (Note 5), the Company recorded convertible debt of $500,000. The Company did not receive cash proceeds. The Company agreed to make four semi-annual payments of $125,000 with the first installment no later than January 15, 2020. The loan does not accrue interest and matures on July 15, 2021. The loan can be converted into shares of common stock of NewBridge at any time at the option of the holder. The conversion price is between $0.75 and $1.00 depending on the fair value of the common stock. The effective interest rate on the loan is 22.3%. The Company recorded a debt discount of $137,547, which consisted of a fair value adjustment of $68,773 and a beneficial conversion feature of $68,774. Amortization of the debt discount was $17,501 for the three months ended June 30, 2019.

As a result of the default on several related party promissory notes as of April 1, 2019, the Company’s convertible notes in the aggregate principal and interest amount of $1,875,009 are deemed to be in default as they contain cross-default provisions. Accordingly, the Company is accruing interest in such notes at their default rates since the date of the default. In addition, the holders of such notes may request that such notes be accelerated as a result of such cross-default.

The convertible notes payable consist of the following:

	June 30,	December 31,
	2019	2018

Convertible notes payable	$ 1,875,009	$ -
Less debt discount	(649,966)	-
Convertible notes payable, net of discount	1,225,043	-
Less current portion	(1,225,043)	-
Convertible notes payable, net of current portion and discount	$ -	$ -